Livestock Analysis | April 15, 2024
Price action: June lean hog futures rallied 37.5 cents to $102.45, settling nearer the session high. Nearby May futures rose 45 cents to $94.325.
Fundamental analysis: Lean hog futures saw limited volatility today, despite a limit close lower last Friday. The lack of followthrough to the downside likely felt like a win for bulls, as generally following a limit-lower close, prices usually continue to fall. The strength seen in the wholesale market likely played a role in the relative strength seen in futures today, as cutout firmed $3.10 to $104.30 at mid-session, well above last week’s for-the-move high of $101.29. Bellies surged $19.49 this morning, a portion of that gain is likely to be given up this afternoon or tomorrow, though strength in ribs was not far behind, rising $6.30. May futures hold a modest premium to the CME lean hog index at $3.675, far less than the five-year average rise of $8.14 in the index from now until the May contract’s expiration in mid-May. The CME lean hog index is up another 72 cents to $90.56 as of April 11, while the preliminary calculation puts the index up another 17 cents to $90.73 tomorrow. Futures traders correctly guessed a slowdown in cash market gains as the April future went off the board at $90.875 on Friday. May futures are likely to follow price action in the cash market and June futures, though the modest premium held gives an inside look to trader expectations.
Technical analysis: June lean hog futures posted modest gains following Friday’s limit move lower. Bulls continue to hold a slight advantage technically, though today’s low marks key support. Initial resistance stands at $102.80 with backing from the 20-day moving average at $103.65, then $105.55. Bulls are seeking to hold support at $101.80, the 40-day moving average, which is backed by today’s low of $101.075, then the psychological $100.00 mark.
What to do: Get current with feed advice. Carry all production risk in the cash market for now.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market another month through April.
Price action: June live cattle closed up $2.35 at $173.825 and near mid-range. May feeder cattle rose $3.80 to $238.00 and nearer the session high.
Fundamental analysis: The cattle futures markets today saw short covering and some perceived bargain hunting after recent losses. There are still positive elements in the cattle markets at present. While cash cattle prices have dropped for three straight weeks, the decline in cash prices has been smaller compared to losses in futures, suggesting a smaller cattle herd will support cattle prices. The fundamental picture in the cattle markets has not changed. The historically low cattle herd is likely to continue to underpin the cattle markets in the coming months.
Last week’s average cash cattle trading price was down $1.89 at $183.84. We expect this week’s cash trade to come in steady-weaker when trade actively commences, likely late this week. Friday afternoon’s USDA Cattle-on-Feed Report could push cash cattle trading into Friday afternoon, after the report. The noon report today showed Choice-grade boxed beef cutout value up 54 cents to $301.11, while Select grade rose 25 cents to $295.79, taking the Choice/Select spread to $5.33. Movement at midday was light at 35 loads.
Technical analysis: The live and feeder cattle futures bears still have the overall near-term technical advantage. Prices are still trending down on the daily bar charts. The next upside price objective for the live cattle bulls is to close June futures above solid resistance at $178.00. The next downside technical objective for the bears is closing prices below solid technical support at $168.00. First resistance is seen at today’s high of $175.625 and then at $177.00. First support is seen at today’s low of $172.325 and then at the April low of $170.25. The next upside price objective for the feeder bulls is to close May futures prices above technical resistance at $245.00. The next downside price objective for the bears is to close prices below solid technical support at $230.00. First resistance is seen at last week’s high of $240.20 and then at $242.00. First support is seen at today’s low of $234.70 and then at last week’s low of $232.625.
What to do: Get current with feed advice. All production risk in the cash market for now but be prepared for some hedge coverage as we have demand concerns.
Hedgers: Carry all risk in the cash market for now.
Feed needs: You should have all corn-for-feed and soymeal needs covered in the cash market another month through April.
